Deck 34: Non-Current Assets Held for Sale and Discontinued Operations

Question 1

Which of the following is not considered one of the additional criteria for being a discontinued operation?

A) Is a subsidiary acquired exclusively with a view to resale
B) Is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations
C) Represents a separate amajor line of business or geographical area
D) All of the above are considered additional criteria.

Answer 1

All of the above are considered additional criteria.

Question 2

To meet the criteria for classification as "held for sale:"
The asset must be available immediately for sale
Management must be must be committed to the sale
The sale must be at minimum somewhat likely
The sale should occur within two years.

A) One of the above
B) Two of the above
C) Three of the above
D) None of the above

Answer 2

Two of the above

Question 3

Global Defense Monitoring (GDM) is a defense contractor that operates several spy satellites for a national government. Each satellite's services are considered a major line of business, as each satellite might be contracted to a different branch of intelligence or armed services. A rogue nation conducting rocket launches unintentionally-but seriously-damages one of the satellites. Crews will be unable to launch into orbit and assess the damage to the satellite until a later date. Until then, the satellite will remain non-operational in orbit. How should GDM account for this situation?

A) This segment should be accounted for as Held for Sale, because management might want to sell it.
B) This segment should be accounted for as an abandoned asset because crews can't reach the device until later.
C) This segment should be accounted for both Held for Sale and as an abandoned asset, depending on what crews find out.
D) This segment should not be accounted for as an abandoned asset or Held for Sale.

Answer 3

This segment should not be accounted for as an abandoned asset or Held for Sale.

Question 4

According to IFRS 5, how should assets to be disposed be classified?

A) At cost
B) At cost less selling expenses
C) At fair value
D) At fair value less selling expenses

Question 5

If an asset is carried at fair value but is now being reclassified as an asset for disposal

A) The asset should remain at fair value, however, the selling costs must be deducted from the fair value of the asset and result in an immediate charge against current period profits.
B) The asset should remain at fair value, however, the selling costs should be recognized separately into deferred accounts.
C) The asset should remain at fair value.
D) The asset should remain at fair value, however, the firm must disclose expected selling costs in the notes to the financial statements.

Question 6

Which of the following is required disclosure for discontinued operations under IFRS 5?

A) Adjustments made in the current period to amounts as a discontinued operations in prior periods as a separate disclosure.
B) A detailed explanation for use by stakeholders and potential investors as to why operations were discontinued as a separate disclosure.
C) An assessment of each business segment explaining whether the entity anticipates it to be a continuing operation as a separate disclosure.
D) None of the above.

Question 7

Assets that meet the classification as held for sale and discontinued operations may not be presented separately in the financial statements.

Question 8

Once classified as held for sale, non-current assets or assets within a disposal group are measured at their fair value.

Question 9

Non-current assets to be abandoned cannot be classified as held for sale.

Question 10

The results of discontinued operations are presented separately in the statement of comprehensive income; however, they receive no special treatment in the statement of cash flows.

Question 11

An entity is required to test for impairment both at the time of classification as held for sale and subsequently.

Question 12

Under IFRS, an entity cannot have continuous involvement in discontinued operations.

Question 13

Under IFRS 5, classification as a discontinued operation requires that the determination be made on the facts existing at the end of the reporting period. Thus, retroactive classification as a discontinued operation is prohibited when the discontinued criteria are met after the date of the statement of financial position. Briefly explain why this is important and how it is consistent with principles laid out in the Conceptual Framework.

Question 14

First define and list the characteristics of a discontinued operation. Then answer the following question: How does the definition of a discontinued operation conform to the fundamental quality of "relevance" as outlined in the Conceptual Framework? Explain.